America will never recover when China builds our infrastructure

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America will never recover if we outsource everything, including our public infrastructure. Bloomberg made the excellent video above about California outsourcing the construction of a portion of the San Francisco Bay Bridge to Shanghai Zhenhua, a Chinese firm. Shanghai Zhenhua is assembling the section and will then ship it to California for installation. The state is supposedly saving $400 million with this move. The workers at the Chinese facility are making $12 dollars a day.

In times of fiscal stress it’s easy to understand why public entities are trying hard to cut costs. But this “cost cutting” is really just off-shoring American jobs. Something has to give — we can’t recover without creating American jobs. It’s our choice, and I choose spending more and creating jobs at home.

The week’s new inventory can’t seem to reach the muni market fast enough. One trader in Florida said there is little product anywhere. “There are fewer bonds than usual,” he said. “It’s hard to find anything to sink your teeth into.”

Muni yields have been following Treasuries lower. But they aren’t too low for the market to absorb the new volume, wrote Tom Kozlik, a muni credit analyst for Janney Capital Markets.

Rhode Island city near collapse

It’s an ugly end game for Central Falls, RI. The New York Times reports that the city’s money is gone and they owe a lot to retired firemen and policemen:

The small city of Central Falls, R.I., appears to be headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.

Watchdogs bite in Chicago

There is no story that I like better than one of citizens watching over their government and identifying waste and corruption. The Better Government Association in Chicago went after unauthorized credit-card use at city agencies and created some big waves. BGA reports on their blog:

Today the city is making big changes to rein in city spending and credit card abuse. Mayor Rahm Emanuel announced he’s eliminating most of the 500 city credit cards and banning the use of petty cash altogether.

I wonder whether California has performed the right financial analysis, such as factoring revenues from corporate and individual taxes, decrease in unemployment expenditures, and secondary tax revenues from spending by firms and individuals which sustains additional firms and jobs, and preservation of their tax base and workforce before investing their money in China instead of in California?

{The state is supposedly saving $400 million with this move. The workers at the Chinese facility are making $12 dollars a day.}

Whether it is Chinese workers building bridges or Indian programmers brought in from abroad to develop IT software, the effect is the same … we ship jobs abroad.

There comes a moment when either San Francisco or a bank “saving money” by having work performed abroad is no longer in the national interest. No money is saved when dislocating such work cause Americans to be remain on UI.

Had the money been spent here, its economic multiplier effect (as that money ripples through the economy) would have sustained more jobs in the US. The damage has been done and it is irreparable.

If the State of California is saving $400 million on this project, where is the money going and how will it be used? Will it be used to pay the govt workers and teachers who have been laid off? Or maybe the extra money will be used to finance other “projects” brought in by brokering companies for this deal?

So, if the work were to cost the state an extra $400 million, it would be spent (I am assuming here) on pay for domestic employees, who then would spend it on iPads or flat screen tvs. In essence, the money is only one step removed from China (or Vietnam or Indonesia). Until Chinese labor mobilizes to attract higher wages (with current inflation rates, probably sooner than later), or transportation costs become prohibative (carbon taxes do have some benefits, making international trade more expensive), the cash outflow will continue. I don’t see any reference to GE turbines or Boeing jets going to China, which I am certain irks the Chinese nationalists.

As for the $375,000 ave retirement plan…assuming a pensioneer lives on average for 25 years following retirement, that’s less than $20,000 a year, invested at 5% (good luck on finding that rate on a safe investment). Yeah, those unions really killed things. And why, exactly, wasn’t the pension fully funded? Because of a tax loophole that lets corporations write off future pensions from today’s taxes. Before you blame the greed of the unions, look at the rapacity of the employer. Maybe if they were non-unionized (like Enron employees), they would have no contract and the employer could walk away from the obligation?

[...] Cate Long, a blogger at Reuters, argues that the U.S. economy will never recover if American companies and public utilities continue to outsource infrastructure projects overseas. She writes on the MuniLand blog: [...]

Posted by Final Segments For San Francisco Bay Bridge Are Ready To Ship—From Shanghai | Brian Brown&#8217;s Official Website | Report as abusive

Jul 14, 2011

4:32 pm UTC

[...] Cate Long, a blogger at Reuters, argues that the U.S. economy will never recover if American companies and public utilities continue to outsource infrastructure projects overseas. She writes on the MuniLand blog: [...]

Posted by I would drive accross this for love nor money &#8211; probably held together by chop stix &laquo; cwwrants | Report as abusive

Jul 15, 2011

8:55 am UTC

[...] i mean can’t we just trust them to make toxic toothpaste, dog food and milk? from here America will never recover if we outsource everything, including our public infrastructure. [...]

Posted by San Francisco Bridge Future Disaster -Jobs Outsourced to China &laquo; Understanding China, One Blog at a Time | Report as abusive

Author Profile

I’m Cate Long and I write about the retail fixed income markets including municipal bonds. My primary interest is creating tools and systems to help retail investors understand bond markets. I’ve worked for a number of years with industry standards organizations, regulators and Congress to help craft a more transparent and fair framework for investors to participate in the fixed income markets. I'm a guest contributor to Reuters.com. Any opinions expressed are mine alone.